Wednesday, July 1, 2009

The New York Times has a piece on so-called "Limited Benefits" health insurance plans, which, judging from the article, are the health insurance equivalent of window dressing:

Too many other people already have coverage so meager that a medical crisis means financial calamity.

One of them is Lawrence Yurdin, a 64-year-old computer security specialist. Although the brochure on his Aetna policy seemed to indicate it covered up to $150,000 a year in hospital care, the fine print excluded nearly all of the treatment he received at an Austin, Tex., hospital....

He and the hospital say they were surprised to eventually learn that the $150,000 hospital coverage in the Aetna policy was mainly for room and board. Coverage was capped at $10,000 for “other hospital services,” which turned out to include nearly all routine hospital care — the expenses incurred in the operating room, for example, and the cost of any medication he received.

In other words, Aetna would have paid for Mr. Yurdin to stay in the hospital for more than five months — as long as he did not need an operation or any lab tests or drugs while he was there.

So what we have, in essence, is a plan that, on the surface, offers $150,000 of medical coverage, but once you dig deeper, really only cover $10,000 in care, as the additional coverage that it claims to offer is exceedingly unlikely ever to be needed. It would be like my selling you a $250,000 insurance policy on your house that covers only $10,000 for fire damage and up to $250,000 for a meteor strike.

Most interesting is the way that Mr. Yurdin's employer justified offering such plans:

Although Mr. Mann acknowledged that the plan Mr. Yurdin purchased excluded routine hospital care, he said he thought it still provided value to employees who wanted “peace of mind.”

In other words, it allows people the "peace of mind" of believing that they have health insurance when, in fact, they do not. That sounds suspiciously like fraud to me.

Elsewhere in the article it mentions that Mr. Yurdin's plan cost him $250 per month. So, in essence he's paying $3000 per year in premiums for $10,000 in potential coverage.

One of the shocking realities of the health care debate that is hardly acknowledged is that, even though the U.S. currently has 47 million uninsured people, a significant number of those who are insured have coverage under a so-called "limited benefits" plan. In other words, they are statistically counted under the "insured" column when, in fact, they should probably be labeled as "uninsured" given the disastrous financial consequences of a serious illness under such a plan.

Later in the article a representative from Aetna claims that these plans are necessitated by the fact that the U.S. does not have a "health care mandate" that helps spread the risk of coverage among health as well as infirm citizens. And Aetna is correct in that regard. Universal coverage is essential if we are to make health insurance broadly affordable. But this, of course, also points to the necessity of a government alternative plan to help keep the insurance companies "honest." If we're going to insist that all American buy coverage, we cannot just wrap them in a blanket and drop them at the doorsteps of the vultures in the insurance industry.

Of course, I feel that a government single-payer plan would be the simplest and most cost effective method for reforming our health care system and getting our ballooning debt under control. It is, alas, probably impossible given political realities.